Trading Plan for December 12, 2011

Economic Reports Due out (Times are EST): Treasury Budget (2pm)

Premarket Update: 

• Futures are moderately lower heading into the open. 
• Asia was mixed but on the whole, was up 0.8%. 
• Europe is trading lower, on average about -1.0%

Technical Outlook:

• Friday provided a surprising and strong rebound in the market after Thursdays significant sell-off. 
• Despite Friday’s rally, price is just below the 200-day moving average and the downward trend-line off of the 7/7 highs.
• Four out of the last five trading sessions have failed to break through this trend-line. 
• Gap-up/gap-downs continue to dominate (or plague) this market and limiting intraday moves during market hours. 
• Note the larger downward channel that we are in as noted below.
• On the 30 minute S&P chart, note that there is inverse head and shoulders pattern forming dating back to late October.

My Opinions:

• Price action looks bearish trading under the descending 7/7 trend-line mentioned above. 
• The only way I could bring myself to adjust my bearish outlook on this market is if we break above the aforementioned trend-line. Then the entire outlook would be different for the market. 
• Using the trend-line I like the risk here – which if very limited. Reward looks significant, should the market fail to breakout. 
• Volume was rather light on Friday as it was for much of last week. 

My Portfolio:

• 100% Cash
• Closed SCO on Friday for about 3.1% in gains. 
• Closed TZA at break even. 

The Chart: